ADIA Plans Multi-Billion Dollar Fund for India Investment

The Abu Dhabi Investment Authority (ADIA), the UAE’s largest sovereign wealth fund, is set to launch a $4-5 billion fund dedicated to investments in India, according to sources cited in a Reuters report. The fund will operate from a tax-neutral finance hub located in Gujarat, Prime Minister Narendra Modi’s home state.

Regulatory approval from the financial services authority at Gujarat International Finance Tec-City (GIFT City) has been granted to ADIA for the establishment of the fund. This development follows the announcement made in July last year by India and the UAE, yet the specific investment amount and regulatory approval had not been previously disclosed.

ADIA’s approval marks a significant milestone as it becomes the first sovereign wealth fund to venture into Indian investments through GIFT City. This decision coincides with PM Modi’s upcoming visit to Abu Dhabi for the inauguration of a prominent temple, further solidifying relations between India and the UAE.

PM Modi’s consistent visits to the UAE over the past decade have strengthened ties with India’s third-largest trading partner. Trade between India and the UAE reached $85 billion for the fiscal year ending in March 2023, with the UAE boasting one of the world’s largest Indian diaspora populations, comprising nearly 35% of its total inhabitants.

According to sources, ADIA is expected to begin investments through the fund by mid-year, with funds allocated gradually towards Indian ventures. GIFT City facilitates investments in both Indian and foreign assets, offering attractive incentives such as a ten-year tax holiday for companies and tax exemptions on overseas fund transfers.

The Modi administration has been actively promoting GIFT City as a premier hub for global capital and financial services, recently allowing unlisted Indian firms to directly list shares on its exchanges. Additionally, Finance Minister Nirmala Sitharam highlighted the government’s ambition to position GIFT City as a key financial hub during the budget announcement.

ADIA and its subsidiaries have enjoyed exemptions from long-term capital gains taxes on Indian investments, further incentivising its foray into the Indian market. Despite a slow start, fund management activities at GIFT City have gained momentum, with significant commitments from local and global funds.

The International Financial Services Authority (IFSCA) is reportedly in discussions with other sovereign wealth funds to establish operations in GIFT City, signalling growing interest in the hub as a preferred destination for financial investments and services.